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When Mitt Romneyreleased the second of his tax returns last
month, he also gave us a summary of his 1990-2009 taxes prepared
by his accounting firm, PricewaterhouseCoopers (PwC). The whole
point of that exercise, aside from trying to distract people from
demanding the actual returns, was to muddy the waters and hide
behind the supposedly strong reputation of PwC: an accounting
firm would never lie, would it?

Of course, this is a silly question on its face. Who do you think
designs abusive tax shelters, other than tax accountants and tax
attorneys? Now, in a new study by the Tax Justice Network, we see
that there is a positive correlation between a jurisdiction's
(remember, not all tax havens are independent countries) secrecy
index and the number of banks and Big Four accounting firms (PwC,
Ernst & Young, KPMG, and Deloitte) per capita present there. The report
documents one "leveraged partnership transaction" that PwC both
designed and then pronounced to be legally valid (in what is
usually termed an "opinion," for which it was paid $800,000),
which the U.S. Tax Court strongly criticized as a "conflict of
interest" when it upheld the Internal Revenue Service's squashing
of this arrangement.

More specifically, we find that the Cayman Islands had the third
most Big Four accounting offices per 1000 population at 0.95,
compared with just .001 per 1000 for the United States (see
Graphs 4 and 5, p. 24, in the report). This density is almost 100
times higher in the Caymans than in the U.S. The Caymans also had
more than twice as many banks per 1000 as any other
country, at 4.5 per 1000, compared to .023 per 1000 for the U.S.
(Graphs 1 and 2). The graph below shows Big Four offices per
1000:

Note, too, that Bermuda (which the Romneys also have used) comes
in at about .06 per 1000 population, or about 60 times the U.S.
rate.

Similarly, we find that comparing the secrecy score of the 20
worst tax havens with the Tax Justice Network's broader list of
71 tax havens and with the G-20 nations shows a much higher mean
and median secrecy score in the tax havens than in the
non-havens, as the next graph shows.

As Richard Murphy, one of the authors of the report, comments at
Tax Research UK:

This research lets us conclude that working in conditions of
secrecy has become an inherent part of the work of bankers and
accountants. It suggests that this has led to a culture of
creative non-compliance with laws and regulations, which is
likely to increase the potential for, and volume of, crime. At
the same time, banks’ and Big 4 firms’ lobbying for laws and
regulations that reduce transparency is likely to have resulted
in further opacity in the world’s financial system. This, then,
is the world in which Mitt Romney travels, a world in which
accounting firms actively seek to create tax avoidance
opportunities with little concern for whether they step outside
the law's boundaries, and in so doing facilitate the transfer of
the tax burden from the 1% to the 99%. In my opinion,
PwC's assurances about Romney's tax situation are not worth the
paper they're printed on.

Bonus question for President Obama to pose in the third debate:
Why is the "McCain precedent" (2 years of tax returns) more
important to you than the George Romney precedent (12 years of
returns)?